impact on the degree of competition, they could in the future. In any event since the requirement would only be applied when a carrier was found not fit, the potential administrative burden does not seem unreasonable. importantly, in some areas there could be "less anticompetitive alternatives" to simply finding a carrier unfit. For example, the public's interest may be protected by placing restrictions on the suspect carrier.



July 19, 1979

Honorable Edward M. Kennedy


Committee on the Judiciary
United States Senate

Washington, DC 20510

Dear Mr. Chairman:

This is in response to your letter of June 27, 1979, requesting the views of the National Credit Union Administration (NCUA) on S. 1291, The Administrative Practice and Regulatory Control Act of 1979.

This agency has continuously supported regulatory reform efforts and has voluntarily complied with the provisions of E.0. 12044. Our final regulation on rulemaking became effective on April 16, 1979.

We are pleased to offer support for the type of reform proposed by S. 1291. We support the concept of increased public participation as well as the provisions to coordinate existing regulatory improvement activities. This bill provides for a Presidential review of many of the regulatory agencies including NCUA and we concur in this approach. As our detailed comments point out, credit unions and their common bond requirement for membership pose some difficulties in applying traditional measurements of competition. Approximately 90% of credit unions do not and in fact cannot compete for the funds of the general public.

Our detailed comments on these issues and others are as follows:

1. Sec. 101. The concept of "emergency rule" will provide each agency with the opportunity to promulgate a regulation immediately when necessary to prevent serious injury to an important public interest, substantial frustration of legislative policies, or serious damages to a person or class of persons. However, the agency would, whenever appropriate, be required to comply with the usual rulemaking requirements after the emergency rule is issued. This, in our opinion, provides the agency with the opportunity to issue an interim rule without denying the public the opportunity to participate in the formulation of the final rule. We support this provision and suggest that more explicit guidance be set forth in the legislative history.

2. Sec. 102 would require an agency to issue an Advance Notice of Proposed Rulemaking for all significant rules before issuing a proposed rule. NCUA has used this technique in connection with a proposal to regulate the debt collection practices of Federal credit unions (See: 44 F.R. 20447, April 5, 1979). The comment period ended on June 30, 1979, and we are still in the

process of evaluating the comments. Nevertheless, the response to the Advance Notice was enthusiastic, indicated that the problem was not as serious as originally contemplated, and could result in a decision not to promulgate a regulation on this issue. Although we recognize that the use of this technique will considerably lengthen the time it takes to issue a regulation, the exceptions for "emergency rules" and "non-significant rules" may make the use of this technique manageable.

3. Sec. 103 would amend 5 U.S.C. 553(d) to require an agency to maintain a file on each rulemaking proceeding which would include the notice of proposed rulemaking, copies of documents relied upon by the agency, copies of written comments, records of communications with outside parties, and other material which is required by law to be made public. NCUA's Office of General Counsel presently maintains a system of rulemaking files substantially similar to those required. This has been useful to the staff in the development and subsequent interpretation of the regulations and has not imposed a substantial burden on the agency.

4. Sec. 103(a) would establish a new Administrative Procedures Act provision, 5 U.S.C. $553a, which would require agency officials to keep written records of oral or written communications from persons outside the agency "relevant to the merits of a rule making proceeding for a significant rule." This requirement will increase the workload of agency officials, but, in light of the public interest in the development of significant rules, this burden is worthwhile. However, in order to decrease this burden, it is suggested that communications that do not contain comments on the proposed rule, such as requests for information concerning the proposed rule (1.e., citation in the Federal Register, where comments should be sent and the date the comments are due, and questions on the meaning of certan provisions), not be considered to be "relevant to the merits" and thus excluded from $553a coverage.

The proposal also explicitly recognizes the need to hold certain communications in confidence. The bill provides that the exemptions from the Freedom of Information Act's mandatory disclosure provisions would apply to the requirement that the written record be included in the public comment file. Since this proposal would include communications from other agencies, the exemption for inter-agency memorandum (5 U.S.C. $552(b)(5)) would be important.

5. Sec. 104(a) would establish a provision for the funding of public participation in rulemaking. The Administrative Conference would implement this provision by issuing regulations, establishing procedures for making awards and for reviewing performances, and would be responsible (after consultation with the agency) for making the awards. One potential problem

is that of the time needed to decide upon the applicant's need, the need Ior Dalanced representation, the importance of public participation on a particular issue, and the complexity of the issue presented. This will require the Administrative Conference to understand the substantive issues for all the agencies involved as well as the qualifications of the applicants. Centralization of this function (to permit a neutral body to control the funds) will likely lead to a bottleneck in which applications are ruled upon after the time for effective representation. As an alternative, the following suggestions are offered. First, applicants should be permitted to submit blanket applications specifying the types or areas of issues that they wish to be considered for in relation to a particular agency's rulemaking procedures. Thus the qualification of an applicant can be decided independently of, and prior to, the emergence of a particular issue. Second, the process of approving funding on a particular issue should be decentralized so that those most familiar with the issues can determine the complexity and importance of the issue, the importance of public participation, and the need for balanced representation. If these suggestions are taken together, the Administrative Conference could decide on the qualifications of the applicant and could award the public funds after being advised by the agency of the need on a particular issue. This should expedite the procedures.


Sec. 201 would require agencies to consider the competitive effects of their actions and to select the least anticompetitive alternative legally and practically available. This requirement would apply to agency rulemaking, licensing, and to sanctions imposed by the agency. NCUA will nave some particular problems in complying with this requirement. First, the Federal Credit Union Act limits the the chartering of Federal credit unions to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district (12 U.S.C. §1759). This provision necessarily results in some anticompetitive restrictions being imposed by NCUA. For example, NCUA must limit the extent to which a Federal credit union can compete for "customers" by limiting their field of membership. Although the proposal recognizes tha statutory goals may intervene in selecting the least anticompetitive alternative, there is the possibility that NCUA's chartering policies may be viewed to be in violation of the proposed legislation. Secondly, the proposal would appear to apply to actions taken by NCUA to place insolvent credit unions into involuntary liquidation. These actions are taken by NCUA primarily upon the finding that a credituniondeminsolventend»doES not appear to be able to return to a solvent-state-within-a"reasonable period of time. However, these actions may be considered to be orders" or sanctions may be said to "limit the distribution of services.... and have the anticompetitive effect of eliminating a source of financial services in a community.

This may have the effect of requiring NCUA to

permit some insolvent credit unions to remain in operation.


7. Sec. 301 would establish a program to review, over a period of 10 years, the effect of regulatory agencies. NCUA would be reviewed, along with the other financial institution regulatory agencies, in 1992. The review would be initially undertaken by the Committee on Regulatory Evaluation, established by the President and composed of the heads of some specified agencies, tive individuals appointed by the President, the head of the agency under review (on an ad hoc basis), and a supporting staff. Two million dollars would be appropriated each year for the Committee's work. The Committee would review the agency and its proposed reform to increase economic competition, achieve statutory goals by less restrictions or new regulatory means, increase the effectiveness of regulations, and enhance the agency's ability to protect health, safety, and consumer interests. The President will issue a report and recommend legislation. The legislation would be a privileged matter and could be discharged from the committee considering it on the motion of a person favoring the legislation and upon a vote of 1/5 of the members of the House considering it, but only after 360 days of continuous session after it was introduced.

NCUA can support this provision. It permits the agency to participate in the review of its activities (as ad hoc member of the Committee) rather than having the review conducted by a body that is not comprised of persons sensitive to important agency issues. The procedures also appear to permit an expeditious consideration of legislation by Congress without tying the agency to other programs as would other proposals with automatic sunset provisions.


Sec. 401 would revise and expand the authority of the Administrative Conference of the U.S. Among other things, the Conference is directed to establish a Committee on Administrative Procedures composed of members of the Conference, employees of Federal regulatory agencies, and private citizens. The goal of this Committee would be to, within two years, develop regulations governing the rulemaking procedures of 5 U.S.C. §§553 through 558. These rules would be binding on all agencies, and agencies could not adopt inconsistent procedural rules. The Chairman of the Administrative Conference would be authorized to grant waivers or modifications on petitions by independent Federal regulatory agencies. These provisions could, potentially, be very worthwhile. The provisions of the Administrative Procedures Act are not well defined, either in the statue or by subsequent case law. Therefore, specific regulations which do more than merely repeat the broad language of the APA would be useful. Since the Federal agencies would be bound by these regulations, they should explicitly be provided with the opportunity to participate in this rulemaking process. It is also suggested that any modification or waiver authorized by the Chairman should be promulgated as an amendment to these regulations so that the public and the other agencies have an opportunity to be informed and to participate in the decision. At minimum, such modifications or waivers should be published in the Federal Register so that Federal agencies similarly situated and the public will be aware of the Conference's approval of such changes.

I hope these comments are of assistance.


Jenny Comer



« ForrigeFortsett »